Friday, September 7, 2012

We're Not Feeling It from The Weekly Standard Blog by Jay Cost

On Wednesday night, former president Bill Clinton assured us that nobody could have managed the Great Recession better than Barack Obama. He compared Obama’s tenure to the period between 1993 and 1996, when the economy was recovering but people were not yet feeling it. He assured us that, soon enough, we will feel this recovery.

It seems unlikely. In fact, the evidence shows that job growth has stalled during the Obama tenure, that the stall has been over a year in the making, and that the rate at which we are stuck is far too low to generate the kind of prosperity enjoyed in the mid-1980s and mid-1990s.

To appreciate this, I want to look beyond the jumpiness of the month-to-month absolute change in the jobs numbers. Instead, let’s look at the percentage change from one year ago. This gives us a good sense of the longer-term trend in the economy.

Here it is, for Obama’s tenure to date:

As we can see, job growth has basically stalled around 1.5 percent year-over-year, where it has been for quite some time. Importantly, population growth works out to be about 1.5 percent every year. So, in reality, we have not begun to fill the jobs hole from the Great Recession, when we account for population. We have only stopped digging.

This is not typical of deep recessions similar to this one. We can go back and look at the first term of Ronald Reagan’s administration, which had a very deep recession, and see job growth take off.

How about Clinton’s first term? This is to look at important because, while he did not have a recession on his watch, he did say that 1993-96 was like the current period in which we are not feeling it…yet.

In fact, job growth was accelerating almost from the moment he took office, and peaked at 3.5 percent. This is why, by 1996, we were feeling it.

What about the first term of George W. Bush’s administration? The business cycle being what it was, he basically drew the short straw and inherited the Clinton recession. During the campaign, he was constantly attacked for a “jobless recovery.” How did it stack up to the current period?

In fact, by the time of the election, job growth had been accelerating for about a year. And during 2005 and 2006 the yearly percentage change in job growth would top off just above 2 percent. Not spectacular by any stretch, but much better than this. And remember: we lost far fewer jobs in the comparably mild recession of 2001, so there might have been less potential for a “snap back.”

So right now is weak, and flat. Or perhaps worse: In what is the most worrisome sign of all, the household survey – from which the unemployment rate is calculated – also shows that job growth has been the weakest in this recovery, but that it is also decelerating. Here is the year over year change in job growth from 1980 to the present.

That is a broader-yet-bouncier measure of employment than the establishment survey, so time will tell. Nevertheless, this is a bad trend.

So my key takeaway: The data suggests that, at the current pace, we are not going to feel this recovery any time soon. In fact, all we have been doing for 18 months is basically treading water in terms of jobs, and there is no evidence that this will change.

Given the very sizeable hole created by the Great Recession, this means that it feels like it is ongoing, and it will feel like a recession so long as the economy cannot improve the rate of job creation.